How Couples Can Manage Different Retirement Timelines

When it comes to marriage, there are expectations, and then there is reality. You may have envisioned, for example, that you and your partner would discuss the news of the day over a leisurely dinner, only to find yourself grabbing a Hot Pocket before taking the kids to band practice. That trip to Paris you planned for a landmark anniversary? The closest you’ve come to the City of Light is watching the opening ceremony of the 2024 Summer Olympics.

Your plans for retirement may also fail to live up to your expectations, particularly where timing is concerned. While more than one-fourth of workers say they expect to retire with their spouse, only 11% of current retired couples left the workforce at the same time, according to a survey by Ameriprise Financial.

Staggered retirement has become increasingly common among dual-income couples for a variety of reasons, ranging from age differences to contrasting views of job satisfaction. In some cases, retirement is unavoidable — one partner can no longer work because of health issues, for example, or is a victim of corporate cutbacks. But even when staggered retirement is voluntary, it can raise a host of emotional and financial issues, from who will be responsible for meals to how the couple will spend their free time, says Catherine Valega, a certified financial planner with Green Bee Advisory in Winchester, Mass.

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Brad Klontz, a CFP and financial psychologist, says his mother was so frustrated by the changes in her household after his stepfather retired that she sped up her own plans for retirement. When one spouse retires while the other continues to work, “it really shakes up the way you’ve been doing business in a relationship for many years,” he says. “It’s a huge stressor on the relationship.”

Still, having one partner work longer, even if it’s just another year or two, can solidify your retirement security. The working spouse can continue to contribute to a retirement savings plan while reducing the amount you’ll have to withdraw from your savings to pay the bills. In 2025, workers age 60 through 63 can contribute up to $34,750 to their plans. Even if the working spouse is unable to contribute the maximum, any additional contributions will extend the life of your retirement savings and reduce the risk you’ll outlive your money. Given increases in longevity, there’s a good chance that at least one spouse “will live an exceedingly long life,” says Abrin Berkemeyer, a CFP with Goodman Financial in Houston.

However, continuing one spouse’s income could give some couples a false sense of security that leads to overspending, says Melissa Caro, a CFP and founder of My Retirement Network, a consumer website. The early years of retirement are often referred to as the “go-go” years because that’s when retirees are usually healthy enough to travel and pursue other activities that cost money. A report by J.P.Morgan Asset Management found that spending temporarily increased in partially retired households with pre-retirement income of less than $150,000. Similarly, more than half of retirees say their overall spending is higher than they expected, according to the Employee Benefit Research Institute’s 2024 Retirement Confidence Survey, and more than one-third said they spent more than expected on travel and leisure. “It’s essential to revise the household budget to reflect the fact that there is one less income earner,” Caro says.

If you determine that you’ll need to withdraw some money from your savings to replace a portion of your lost income, you’ll have to decide whether to draw from your workplace retirement plans, traditional IRAs, Roth IRAs or brokerage accounts. You may need to consult with a financial planner or tax professional to determine the most tax-efficient option. Ideally, you’ll want to withdraw just enough to remain within your tax bracket, which could involve a combination of withdrawals from a variety of accounts (for more, see Tax-Smart Strategies for Account Withdrawals).

Here are other considerations for couples as they manage diverging retirement dates.

Health insurance

Staggered retirement can be particularly useful if one spouse retires before age 65 and needs health insurance. While most Americans plan to retire at age 65, many end up retiring earlier due to health issues, layoffs or other circumstances beyond their control, according to the Employee Benefit Research Institute’s 2024 Retirement Confidence Survey.

Whether you retire early by choice or because you’re unable to work, you’re probably going to need health insurance coverage until you turn 65 and are eligible for Medicare. One option is COBRA, the federal law that allows you to continue your employer-provided coverage for up to 18 months. A significant advantage of COBRA is that you can continue to see doctors and specialists in your plan’s network. But you’ll be on the hook for the entire premium (employers usually don’t assist with paying premiums for COBRA coverage, as they typically do for employees on their health plans), plus administrative fees.

If your spouse continues to work and has employer-provided health insurance, joining your spouse’s plan is a less expensive option. Losing your own coverage qualifies you for special enrollment outside the company’s usual open-enrollment window, so your spouse won’t have to wait until the open-enrollment period to add you to their coverage. If your spouse is satisfied with the coverage, “that’s definitely the path of least resistance,” says Kevin Coombs, a CFP with Donaldson Capital Management in St. Louis.

A couple of caveats: Your premiums may be higher than your spouse’s because employers don’t have to contribute toward a family member’s coverage, and some companies add a surcharge to spousal coverage. For that reason, you should compare the cost of joining your spouse’s plan with the cost of buying coverage through your state’s health insurance exchange, which you can find at www.healthcare.gov. The cost of an Affordable Care Act plan will depend on the provider network and out-of-pocket costs, such as deductibles and co-payments. Depending on your income and household size, you may be eligible for government subsidies to reduce premiums or out-of-pocket expenses.

Social Security

Staggered retirement can help couples increase their combined Social Security income by allowing one or both to delay filing for benefits. The spouse who continues working will also be able to continue to increase the amount of benefits they’ll receive based on their earnings record — particularly important if that spouse took time out of the workforce to care for children or elderly parents. Social Security benefits are based on your 35 years of highest earnings, so working a few more years could replace no- or low-earning years with higher-income years.

Meanwhile, if the working spouse’s income provides enough money to pay the bills, the retired spouse may be able to delay filing for benefits, which will also lead to a larger payout. While you can file for benefits as early as age 62, your benefits will be up to 30% lower. If you wait until your full retirement age (FRA), you’ll be entitled to 100% of the Social Security benefits you’ve earned. (FRA is 66 for beneficiaries born between 1943 and 1954; it gradually increases to 67 for beneficiaries born in 1960 or later). If you’re able to postpone filing for benefits past your FRA, your monthly Social Security benefit will grow by 8% a year until you reach age 70. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

Because you’re living on one income instead of two, you may be inclined to file for Social Security before age 70, or even before your FRA. Although that may enable you to postpone taking money out of your savings, it could also result in some unforeseen tax consequences. Taxes on Social Security benefits are based on what Social Security defines as your provisional income (sometimes referred to as combined income), which consists of half of your Social Security benefits plus other sources that contribute to your adjusted gross income, including withdrawals from tax-deferred accounts, capital gains from taxable accounts and wages from a job. If your provisional income ranges from $25,000 to $34,000 for single filers, or $32,000 to $44,000 for joint filers, up to 50% of your benefits will be taxable. If your provisional income is more than $34,000, or $44,000 for joint filers, up to 85% of your benefits will be taxable.

If one spouse files for benefits while the other is working, there’s a good chance that up to 85% of the payments will be taxed, says Clark Randall, a CFP with Creekmur Wealth Advisors in Dallas. Waiting to file until you’re both retired may not eliminate taxes on your benefits — because the thresholds were never adjusted for inflation, more than half of beneficiaries pay taxes on their benefits — but it could reduce them.

Keep in mind, too, that if the retired spouse decides to pursue part-time work or a side gig after filing for benefits, he or she could be subject to what’s known as the Social Security earnings test. In the years before the year you reach your full retirement age, Social Security will withhold $1 in benefits for every $2 you earn over a certain threshold — for 2025, it’s $23,400. In the year you attain your FRA, Social Security withholds $1 in benefits for every $3 you earn over a specified amount — $62,160 for 2025 — but only in the months prior to the one of your birthday. Once you reach your FRA, your earnings will have no impact on benefits, and Social Security will boost your checks to repay you for benefits withheld through the earnings test.

Having the talk

Since 1990, the divorce rate among adults 50 and older has roughly doubled, and it has nearly tripled for couples who are 65 or older, according to the Pew Research Center. Numerous factors have been cited as contributors to the rise in so-called gray divorce, including differing views of how to spend the retirement years.

Many professionals define themselves through their jobs, and losing that sense of purpose can lead to profound loneliness as well as resentment toward the partner who is still working, Klontz says. Working partners may have their own reservoir of resentments, he adds. “All of a sudden, your spouse is sleeping in, and you’re getting up and going to work.”

The key to navigating these difficulties is to discuss your expectations of retirement before one partner turns in their security badge, Klontz says. These conversations should cover everything from the division of household tasks to how you’ll live on one income instead of two. Explore whether the retired partner should consider a part-time job or side gig. Even if the partner earns much less than he or she did from a full-time job, the extra money can reduce the amount you’ll need to withdraw from your retirement savings.

As Americans live longer, a second career after retirement has become increasingly common, and it can help resolve some of the tensions that arise from a staggered retirement. Klontz’s stepfather, who had a longtime career as an educator, ended up starting his own consulting business, and Klontz’s mother worked for the business. “They continued to work for another 20 years after retirement,” he says.

401(k) plans: Yours, mine and ultimately ours

While many couples share their savings and checking accounts, workplace savings accounts, such as 401(k) plans, are owned individually. But to get the most out of your employer-provided plan, you should coordinate the amount you contribute to both accounts.

Ideally, both spouses should contribute up to the company match provided by their respective employers. But researchers from the MIT Sloan School of Management found that many couples fall short of that goal, says Taha Choukhmane, assistant professor of finance at MIT Sloan and co­author of a study that examined how couples allocate their retirement plan contributions. The study’s authors concluded that if a couple can’t contribute enough to get the full match for each account, they should contribute to the account that provides the highest employer match rate before contributing to the other spouse’s plan. The study found that about one-fourth of couples could increase their savings by an average of $682 a year by coordinating their savings strategies.

For example, if one spouse has a dollar-for-dollar employer match up to a 5% cap, and the other spouse has a match of 50 cents on the dollar up to the same cap, the first spouse would contribute up to the match before the second spouse funds his or her account. The key to getting the most out of your employer-provided plans is to view your 401(k) as a joint account, even though it has only one spouse’s name on it, Choukhmane says. “It’s a household asset, so you may as well make the pie as big as possible.”

Of course, the type of arbitrage recommended in the MIT study is only possible when both spouses have access to an employer-sponsored plan — and that’s often not the case. Only about half of private-sector workers have a workplace retirement plan, such as a 401(k), and few of those individuals save outside of workplace plans. If only one spouse has a workplace plan, they should increase contributions because they’re effectively saving for two people — although that rarely happens, according to a 2019 study by the Center for Retirement Research at Boston College.

The study recommends that plan providers that have adopted automatic escalation, which gradually increases an employee’s contribution rate over time, take the worker’s marital status into account when setting default rates. Providers should also educate workers about the importance of increasing contributions if only one spouse is contributing to an employer plan, CRR said.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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